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Ask Larry: How Much Will Each Year Of Income Raise My Social Security Retirement Benefit?

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Today’s Social Security column addresses questions about how continued income can affect benefit rates, how public pensions can affect divorced spousal benefits and taking survivor’s benefits while delaying filing for retirement benefits until 70. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.


How Much Will Each Year Of Income Raise My Social Security Retirement Benefit?

Hi Larry, I’m paying the max Social Security tax on my income and have been doing so. How much would each year increase my Social Security retirement benefit amount? Thanks, David

Hi David, That’s impossible to even approximate without knowing your full earnings history. Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, so the amount that your benefit rate would increase with a year of say $100,000 earnings depends on how much you earned in your previous highest 35 years

Also, the indexing factors used to calculate retirement benefits are different for each calendar year of a person’s birth, so your year of birth also factors into the equation.

Our software — Maximize My Social Security or MaxiFi Planner — calculates your benefits and permits users to enter projected future earnings so that they can determine the effect that those earnings would have on their Social Security retirement benefit rate. You may want to consider using my company’s software to get an accurate calculation of your projected benefit rate and to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


Will I Be Able To Collect On My Ex’s Record Or Will That Be Subject To The Windfall Elimination Provision?

Hi Larry, I work for a state agency and will receive a state pension when I retire, I’m divorced from my ex wife who I was married to for 12 years. I also have accrued enough Social Security credits on my own while working in the private sector before my state job. Will I be able to collect on my ex wife’s Social Security record and will that also be subject to the Windfall Elimination Provision because of the pension I will receive? If so, how much will I lose from it? Thanks, Amit

Hi Amit, Divorced spousal benefits aren’t subject to reduction based on the Windfall Elimination Provision (WEP), but they can be subject to offset due to the Government Pension Offset (GPO) provision.

If you’ll be receiving a state pension based on your earnings that were exempt from Social Security taxes, then any divorced spousal or survivor benefits for which you’d otherwise qualify would almost certainly be offset by 2/3rds of the amount of your state pension. So you could only receive benefits from your ex’s account if the state pension you receive is less than 150% of your divorced spousal or survivor benefit amount.

However, if you have at least 40 quarters (QC) of Social Security covered earnings, then you’ll be eligible for at least some Social Security retirement benefits when you’re at least age 62. It sounds like WEP will likely reduce the amount of your Social Security retirement benefit, but WEP never reduces a person’s benefit rate to zero. Best, Larry


If I Apply For Survivor Benefits Will It Lower What I Receive At Age 70?

Hi Larry, I m 67 and and was laid off in 2020 due to covid. I have enough savings and plan to wait until I am 70 to apply for my Social Security retirement benefit. I am considering applying for my widow’s benefits even though the benefit is small.

If I take the retro on the widow’s, will that lower my retirement benefit when I file at 70? I have heard about the danger of filing retroactively and how it can reducing your benefit rate but since it is my widow’s benefit, will that lower my retirement benefit when I switch to it at 70? Thanks, Sue

Hi Sue, Collecting survivor benefits will not lower the amount of your future Social Security retirement benefit. If your own benefit rate will be higher than your survivor rate, you would almost certainly want to claim your survivor benefits as soon as possible, including the maximum six months of retroactivity.

You can then apply for your own higher retirement benefits later, and the fact that you previously collected survivor benefits will have absolutely no adverse effect on your own retirement benefit rate. Best, Larry


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